Friday, 10 March 2017

GuocoLand - Divestment opportunity

This afternoon, a little after having had my lunch, I was doing some routine checks on my stocks only to find that Guocoland reached my buy price of $1.875. Not only that, the price kept on climbing and the sell queue was being consumed fast and furious. 1.88 1.89 1.9 1.905 ...

I switched to a neighbouring watch list which contains more property counters such as Capitaland, CDL, Wingtai, and indeed, they were all as excited as Guocoland. I went to browse Investing Note hoping for an answer but it seemed like the community was as clueless as I.

Only an industry wide change can create such an impact. I was thinking along the lines that perhaps ABSD / TDSR were reduced or even removed!

After awhile, the news finally released. I read and reread the article at least 3 times. By then, Guocoland was already hovering near their day peak of $1.95. I could not comprehend the rapid rise in prices as I couldn't extract significant positives from the policy changes. At best, I felt that it is only a slight tweak to the property cooling measures. But I thought others knew better hence I held on.

When the price continued dropping to 1.915 / 192, I decided to take action and divest. Remember that I bought the stock because it was a laggard in the previous property rally? It had since closed that gap (at least by a little) with today's surge and for now, I believe in locking in a small gain and wait for the market to calm down and fully digest the news.

Do also read this article that was also released this afternoon. It paints a grim picture for developers who still have unsold properties and could face QC charges. Essentially, it closed off an escape route that white knights can offer the developers. For Guocoland, which was considering an option that could be somewhat similar, it doesn't bode well. On the other hand, it could force the developer's hand into taking the stock private as it is still very under valued and with many catalyst for better earnings ahead.

From today's action, what I can conclude is that the property sector is indeed heavily suppressed. A small tweak sent a ripple, removal or easing of key cooling measures such as ABSD and TDSR is going to create huge waves.

Disclaimer: I'm currently not vested in GuocoLand. The above information are based on my limited understanding and does not constitute a buy or sell call. Always do your own due diligence before taking any actions.

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